Need help? What debt administration can do for you - Times LIVE
   
Latest
Mon May 29 13:28:04 SAST 2017

Need help? What debt administration can do for you

Capitec | 2017-05-16 16:51:22.0

Image by: iStock

SPONSORED | When you become overindebted, your financial affairs can easily spiral out of control. However, by taking charge of the situation you can avoid disaster and keep your financial reputation intact.

As soon as you realise you aren’t coping with your repayments, you must take the necessary steps to protect yourself from getting into more debt, as well as any legal action a credit provider could take against you.

At this point, a few options can offer some debt relief, such as contacting your credit provider for arrangements, debt review and sequestration. Another option is to undergo debt administration.

What is debt administration?

There’s a difference between debt administration and debt review. Debt administration is a process where your instalments are reduced and only paid to your credit provider every three months, resulting in an extended term. On the other hand, a debt review entails a counsellor helping you to manage your credit by negotiating with credit providers to reduce your instalments, interest and term.

How does debt administration work?

After debt administrators take over the management of your finances, they will start a legal process where the court orders them to set aside enough of your income to cover your basic living expenses. They will then negotiate a lower instalment and new payment plan with your credit provider.

Debt administration can carry on indefinitely and will be in effect until your debt is paid off. During this time, your income will be handed over to the administrator and you will only receive the portion the court decided you need to cover your expenses. The debt administrator will save the remainder of your income and pay your credit providers quarterly.

Use debt administration when…

•    you want to stay out of court – the court order prohibits all listed credit providers from taking any legal action against you while you are under administration; or

•    you cannot afford the agreed monthly payments – your administrator can negotiate reduced instalments, spread out over a longer period.

Things to note

•    You can only use debt administration when your debt is less than R50,000.

•    Because payments are made every three months, interest can add up quickly, costing you more.

•    While you are under administration, you won’t qualify for more credit.

•    The plan, as set out by the court, is legally binding.

•    Repaying debt under administration can take a long time.

•    Debt administration is not cheap. Administrators charge a monthly fee of 12.5% that is calculated on the repayment amount, as well as an additional distribution cost.

While your debt won’t get written off because of this process, the strict plan set out by the court will provide you with debt relief and help you live within your means. 

Use this time to recover your credit score so you can become good for credit.

This article was paid for by Capitec.

Capitec-bank-logo.jpg

How debt review can provide debt relief 

SHARE YOUR OPINION

If you have an opinion you would like to share on this article, please send us an e-mail to the Times LIVE iLIVE team. In the mean time, click here to view the Times LIVE iLIVE section.
X